Why Protecting Your Assets is More Important Than Ever

The Stock Market Topping Process of a Lifetime

 

The bursting of the Internet bubble in 2000 devastated millions of investors, most obviously those who held shares of tech stocks. That bear market lasted three years (2000-2002), but was not enough to stop the resurgence of the stock market mania that drove prices to an all-time high in 2007.

And even after this more recent and deeper plunge of 2007-2008, many investors are still bullish today.

For example, this Yahoo! Finance headline from Sept. 24: "Market Mood Swings Back to Elation: Will the Good Times Last?"

Similar headlines are now common in the financial media.

Is it possible that the bullish majority is right? Robert Prechter wrote in the September Elliott Wave Theorist:

"The public always does the wrong thing. Investors have gone from the frying pan (the NASDAQ in early 2000) into the oven (real estate in 2006) into the steamer (the Dow in 2007) onto the grill (commodities in 2008) and now into the fire. Each time, they are sure that their decision is sound."

Gloom and Doom? No more so than a flood warning is a "gloom and doom forecast" when a river is rising rapidly. Those who live by the river welcome the warning. It's how they know to seek higher ground. The warning is not relevant to the actual flood waters, yet it's absolutely essential to the future of the residents.

What do you think?

Eduard Hamamjian

GeaSphere LLC

GeaSphere Total Return Fund

Is your head in the sand?

The AAII sentiment index is reaching highs seen in three previous market crashes. This is bad news, especially when coupled with bearish technicals. When this sentiment indicator gets this overheated, the markets tend to peak. Just looking at the below chart, we can see that huge drops followed the peaks in bullish sentiment.

AAII Investors Sentiment Survey

AAII Sentiment % Bearish Index

There is no good reason for the current bullish sentiment. These levels of bullishness always end badly. Protect yourself or pay the consequence. We can help! 

Eduard Hamamjian

GeaSphere LLC

877-351-4900

Head lines are bogus.

 

Fundamental analysis of financial markets suggests that the stock market trends are a direct result of news and events: A positive economic figure is released, and stocks rise; a destabilizing crisis occurs, and stocks fall.

In reality, however, the system doesn't run so smoothly. Watch the news headlines, and you'll see how often they report on stock prices reacting one way to a certain factor -- only to make a U-turn later and print a story that completely opposes the earlier one.

Take, for example this week's string of headlines regarding stocks and the September 21 Federal Open Market Committee. Here's a brief recap from some major news outlets:

September 21:

• "US Stocks Rally Ahead Of Fed Statement."
• "US Stocks Rise Following Fed Statement. The [central bank] signaled that they 'are prepared to provided additional accommodations if needed to support the economic recovery."

So, on September 21 the Fed news "sounded" bullish. The very next day, when the news clips above weren't even cold yet, stocks declined -- and the September 22 headlines used the same Fed news to "explain" why:

• "Stocks Fall On Concerns about the implications of further Treasury buying by the Fed."
• "Fed Policy Hints Weighs On Stocks."
• Chances are, if stocks rally tomorrow, the "Fed-led" headlines will be back as if no one was the wiser.
• Observations from Elliot-wave International.
• Eduard Hamamjian
• GeaSphere LLC

The Investment Process:

The GeaSphere Price to Free Cash Flow Model determines the true value of stocks, based on the dynamic relationship of stock price to free cash flow.  We determine the buy and sell price of a stock, based in part, on the historical dynamic of the Price to Free Cash Flow relationship.  We also use technical analysis to determine the direction of the market.  We use inverse ETF's to hedge the portfolio against market declines on a short or mid-term basis.  This allows us to accumulate stocks with attractive valuations even during market declines.  Finally, we incorporate an asset allocation methodology that creates a diversified portfolio, based on correlative movement of stocks, using current  market data.  This allows us to eliminate stocks that do not contribute to total return or diversification.